How does Filing for Bankruptcy Affect your Credit Rating?

How does filing for bankruptcy affect your credit rating? The simple answer is that it makes your credit rating very bad, but this need not be a permanent thing. Your credit rating is based on your history of borrowing money through using a credit card or taking loans. The length of time you take to pay up your accounts is noted and your rating is based on your history of paying back amounts on time. When you file for bankruptcy you acknowledge that you are not in a position to pay any of your debts and will not be able to do so in the immediate future. If your debt is very small, it may be written off by your bank, but if it is a large debt this may mean that your credit rating is significantly negatively affected.

In most cases to answer the question “how does filing for bankruptcy affect your credit rating?” won’t have a positive response. It can affect your rating for a very long time, sometimes up to ten years. However, it is not permanent, and can be for only a short period if you manage your finances better in the future. The difficulty though is that you do have to note your status as previously bankrupt when you apply for car finance or home loans. This may mean that the rate of interest you pay could be higher, or you could be required to make higher monthly instalments. Just remember though that if you are in the situation where you are considering filing for bankruptcy, it is obvious that your financial situation will already be quite dire, so it is better than doing nothing.

If you are considering filing for bankruptcy, or have done so and are worried about your credit rating then you should approach your bank for financial advice. This is not something that should be done likely so it is best to know all of the details so that you can answer the question “how does filing for bankruptcy affect your credit rating?”